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There is little doubt that, in the long run, some appropriately measured monetary ag- I gregate is closely linked to ' the price level and the rate of inflation. Less clear are the details of this linkage: Which of the existing monetary aggregates is tied most closely to the price level; to what extent money can be considered exogenous; how prices dynamically adjust to a monetary shock; and the importance of nonmonetary factors, such as demand pressure and supply-price shocks.

Traditional monetarist thought, however, is unequivocal on these details, emphasizing a relatively rapid adjustment of prices to changes in MI or the monetary base, and allowing little scope for demand-pull and costpush inflation. But recent U.S. experience has undermined the empirical support for the strict monetarist view that non-monetary factors are unimportant. Since the inflationary oil shocks of the 1970s and the disinflationary recession of the early 1980s, most monetary aggregates' stable relationships with the value of the Gross National Product (GNP) have deteriorated, thus weakening the linkage between money and prices.'